The recent performance of Alibaba Group ($BABA) was examined using the Elliott Wave Theory. The stock’s rise from its low on January 8, 2026, created a 5-wave impulse, followed by a 3-swing correction known as an ABC correction. This analysis aims to shed light on the stock’s future movements. On January 18, 2026, the 1-hour chart for $BABA showed that it had completed its 5-wave impulsive cycle. A correction, or ABC correction, followed. Buyers were expected to enter the market in the $166.53 to $162.31 range. This area usually signifies the end of a correction and the likely start of a new upward trend. After the correction, the stock bounced back, reaching new highs and confirming the bullish trend. It is expected to remain above the low on January 20 while moving forward in wave 3 of (3). Current targets are between $190 and $207. The Elliott Wave analysis indicates that $BABA is still trading in a bullish pattern. By using this theory, traders can better identify market trends and plan their trades. Understanding impulse and correction phases helps with risk management, especially in volatile markets. Flexibility and discipline are crucial as this structure evolves. Based on the positive technical setup for Alibaba, the recent bounce from the $162-$166 area signals a good time to aim for further gains. The impulsive rally from the January 8 low, followed by a typical correction, suggests that the path ahead is now upward. This could mean that the move towards the $190-$207 target is just beginning. For those trading derivatives, this presents a strong opportunity to buy call options. With the stock trading around $178, consider buying March or April 2026 calls with strike prices of $185 or $190 to take advantage of the expected rise. This strategy allows for potential gains while limiting risk to the premium paid for the options. This technical strength is supported by improving fundamentals noted in late 2025. For example, Alibaba’s Cloud division reported a 22% year-over-year increase in revenue for the fourth quarter of 2025, surpassing expectations. Additionally, December 2025 retail sales data from China showed a 5.8% rise, indicating a strong consumer base entering the new year. In the options market, there has been a significant change in sentiment over the past week. The put-call ratio for Alibaba dropped from 0.95 to 0.72, which means traders are buying more calls than puts. Furthermore, implied volatility is currently moderately ranked at 45, indicating that options prices are not excessively high ahead of this potential Wave 3 surge. To manage risk while aiming for profits, traders might also consider using bull call spreads. One strategy could involve buying the March $180 call and selling the March $195 call at the same time. This approach lowers the initial cost and breakeven point. The trade would benefit from a price rise toward the target zone, but it limits the maximum gain if the stock goes above $195. A crucial level to monitor is the January 20 low around $168. If the stock decisively breaks below this price, it would invalidate the current bullish outlook and indicate that the correction is still ongoing. Traders with bullish positions should use this level as a point to reevaluate or exit trades to protect their capital.

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